Principal Issues: Whether Guaranteed Investment Certificates (“GICs”) issued by a Canadian bank or trust company are assets listed in paragraph 150(1.2)(b)?
Position: No.
Reasons: GIC issued by a Canadian bank or trust company does not meet the description of any of the assets listed in paragraph 150(1.2)(b). Therefore, if a particular trust holds a GIC issued by a Canadian bank or trust company, it would not be a trust described in paragraph 150(1.2)(b).
2024 STEP CRA Roundtable – June 4, 2024
QUESTION 9. Paragraph 150(1.2)(b) and Guaranteed Investment Certificates
Pursuant to paragraph 150(1.2)(b) of the Income Tax Act (Canada) (the “Act”) (footnote 1), subsection 150(1.1) can apply to a trust for a particular tax year where, the trust holds assets with a fair market value that does not exceed $50,000 throughout the year, if the only assets held by the trust throughout the year are one or more of
(i) money,
(ii) a debt obligation described in paragraph (a) of the definition fully exempt interest in subsection 212(3),
(iii) a share, debt obligation or right listed on a designated stock exchange,
(iv) a share of the capital stock of a mutual fund corporation,
(v) a unit of a mutual fund trust,
(vi) an interest in a related segregated fund trust (within the meaning assigned by paragraph 138.1(1)(a)), and
(vii) an interest as a beneficiary under a trust, all the units of which are listed on a designated stock exchange.
Can the CRA advise whether Guaranteed Investment Certificates (“GICs”) issued by a Canadian bank or trust company are assets listed in paragraph 150(1.2)(b)?
CRA Response
The exception in paragraph 150(1.2)(b) applies where a trust holds assets with a total fair market value that does not exceed $50,000 throughout the year, if the only assets held by the trust throughout the year are comprised of one or more of the assets as described in subparagraphs 150(1.2)(b)(i) to (vii). Overall, if a particular trust meets this exception, or one of the other exceptions listed in subsection 150(1.2), subsection 150(1) will not apply to require the trust to file a T3 Income Tax and Information Return where the trust also meets one of the exceptions in subsection 150(1.1). (footnote 2) The trust will also not be required to provide the additional information set out in section 204.2 of the Income Tax Regulations.
The asset listed in subparagraph 150(1.2)(b)(i) is money. Since the term “money” is not defined in the Act, we must look to the ordinary meaning of the term for guidance. The Black’s Law Dictionary, 11th edition, defines money as “the medium of exchange authorized or adopted by a government as part of its currency.” The Oxford English Dictionary, 3rd electronic edition, defines money as “any generally accepted medium of exchange which enables a society to trade goods without the need for barter; any objects or tokens regarded as a store of value and used as a medium of exchange.”
In Moss v. Hancock (1899) 2 Q.B. 116, the court stated that “Money as currency is that which passes freely from hand to hand throughout a community in final discharge of debts and full payment for commodities, being accepted equally without reference to the character or credit of the person who offers it and without the intention of the person who receives it to consume it or apply it to any other use than in turn to tender it to others in discharge of debts or payment for commodities”.
The Government of Canada webpage “Guaranteed investment certificates and term deposits: know your rights” (footnote 3) , generally describes a GIC as a secured investment where the amount invested is returned at the end of the term. It is our view that a GIC issued by a Canadian bank or trust company would not fit within the ordinary meaning of money. Moreover, it is our general position that a GIC is a similar obligation to bonds, debentures, notes or mortgages.
The asset listed in subparagraph 150(1.2)(b)(ii) refers to a debt obligation described in paragraph (a) of the definition fully exempt interest in subsection 212(3). The debt obligations listed in paragraph (a) of the definition of fully exempt interest in subsection 212(3) refer to certain debt obligations of, or guaranteed by, the Government of Canada (otherwise than by being insured by the Canada Deposit Insurance Corporation), certain debt obligations of the government of a province, among others, but does not include a debt obligation issued by a Canadian bank or trust company.
Furthermore, the assets listed in subparagraphs 150(1.2)(b)(iii) to (vii) also do not include a GIC issued by a Canadian bank or trust company.
Overall, a GIC issued by a Canadian bank or trust company does not meet the description of any of the assets listed in paragraph 150(1.2)(b). Therefore, if a particular trust holds a GIC issued by a Canadian bank or trust company, it would not be a trust described in paragraph 150(1.2)(b).
Aleksandra Bogdan
2024-102035
FOOTNOTES
Note to reader: Because of our system requirements, the footnotes contained in the original document are shown below instead:
1 Unless otherwise expressly stated, every statutory reference herein is a reference to the relevant provision of the Act.
2 Note that a T3 Return may be required as a result of the reporting requirements in section 204 of the Income Tax Regulations. See the section titled, Who should file” in the T4013 T3 Trust Guide for more information.
3 See webpage: https://www.canada.ca/en/financial-consumer-agency/services/rights-responsibilities/rights-investing/rights-guaranteed-investment-certificates.html